{"id":97187,"date":"2026-03-03T21:41:12","date_gmt":"2026-03-03T16:11:12","guid":{"rendered":"https:\/\/www.oliveboard.in\/blog\/?p=97187"},"modified":"2026-03-03T21:41:15","modified_gmt":"2026-03-03T16:11:15","slug":"foreign-exchange-arithmetic","status":"publish","type":"post","link":"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/","title":{"rendered":"Foreign Exchange, Forex Market, Important for JAIIB IE &amp; IFS 2026"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_77 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of content<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#What_is_foreign_exchange\" >What is foreign exchange?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#Download_Foreign_Exchange_Arithmetic_Ebook\" >Download Foreign Exchange Arithmetic Ebook<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#How_did_FEMA_evolve_in_India\" >How did FEMA evolve in India?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#What_are_current_and_capital_account_transactions\" >What are current and capital account transactions?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#What_are_inward_and_outward_remittances\" >What are inward and outward remittances?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#What_is_the_Liberalised_Remittance_Scheme_LRS\" >What is the Liberalised Remittance Scheme (LRS)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#What_is_the_Indo_Nepal_remittance_scheme\" >What is the Indo Nepal remittance scheme?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#What_is_the_forex_market\" >What is the forex market?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#How_did_the_forex_market_evolve_in_India\" >How did the forex market evolve in India?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#What_are_the_characteristics_of_the_forex_market\" >What are the characteristics of the forex market?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#Who_are_the_participants_in_the_forex_market\" >Who are the participants in the forex market?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#What_was_LIBOR_and_what_replaced_it\" >What was LIBOR and what replaced it?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#What_is_FEDAI_and_why_is_it_important\" >What is FEDAI and why is it important?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#What_is_the_US_dollar_index_USDX\" >What is the US dollar index (USDX)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#What_are_ADR_and_GDR\" >What are ADR and GDR?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#FAQs\" >FAQs<\/a><\/li><\/ul><\/nav><\/div>\n\n<p>Foreign Exchange and the Forex Market form the backbone of international trade, cross-border investments, and global financial stability. For <strong>JAIIB IE and IFS 2026 aspirants<\/strong>, this topic is not just theoretical it directly connects with practical banking operations, FEMA regulations, remittance facilities, and global benchmarks like LIBOR and USDX. A strong grasp of these concepts can significantly improve your score in the Indian Economy (IE) and Indian Financial System (IFS) papers.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_foreign_exchange\"><\/span>What is foreign exchange?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Foreign exchange refers to foreign currency and all financial instruments payable in foreign currency. It is required whenever transactions occur between residents of different countries. Under the Foreign Exchange Management Act, 1999 (FEMA), foreign exchange includes currency, deposits, drafts, and other instruments expressed in foreign currency.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Component<\/strong><\/td><td><strong>Explanation<\/strong><\/td><\/tr><tr><td>Foreign currency<\/td><td>Notes and coins of another country (USD, EUR, GBP etc.)<\/td><\/tr><tr><td>Foreign currency deposits<\/td><td>Bank balances held in foreign currency<\/td><\/tr><tr><td>Drafts and cheques<\/td><td>Payable in foreign currency<\/td><\/tr><tr><td>Bills of exchange<\/td><td>Trade instruments denominated in foreign currency<\/td><\/tr><tr><td>Electronic transfers<\/td><td>SWIFT \/ wire transfers between banks<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.oliveboard.in\/jaiib-mock-test\/?ref=contac-nai-jaiib-psa\" target=\"_blank\" rel=\"noreferrer noopener\">Attempt A Free JAIIB Mock Test<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-download-foreign-exchange-arithmetic-ebook\"><span class=\"ez-toc-section\" id=\"Download_Foreign_Exchange_Arithmetic_Ebook\"><\/span>Download Foreign Exchange Arithmetic Ebook <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The direct link to download the PDF is provided below:<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.oliveboard.in\/foreign-exchange-and-forex-market\/?ref=contac-nai-reg-jaiib\" target=\"_blank\" rel=\"noreferrer noopener\">Download Foreign Exchange Arithmetic Ebook<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-did-fema-evolve-in-india\"><span class=\"ez-toc-section\" id=\"How_did_FEMA_evolve_in_India\"><\/span>How did FEMA evolve in India?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>FEMA replaced the earlier foreign exchange law to liberalize and manage foreign exchange transactions instead of strictly controlling them.<\/p>\n\n\n\n<p>Before FEMA, India had the Foreign Exchange Regulation Act, 1973 (FERA). FERA was restrictive because India faced severe foreign exchange shortages. After the 1991 economic reforms, a liberal law was needed, leading to FEMA in 1999 (effective 1 June 2000).<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Basis<\/strong><\/td><td><strong>FERA<\/strong><\/td><td><strong>FEMA<\/strong><\/td><\/tr><tr><td>Nature<\/td><td>Criminal law<\/td><td>Civil law<\/td><\/tr><tr><td>Objective<\/td><td>Conservation &amp; control<\/td><td>Management &amp; facilitation<\/td><\/tr><tr><td>Approach<\/td><td>Restrictive<\/td><td>Liberal<\/td><\/tr><tr><td>Violations<\/td><td>Criminal offence<\/td><td>Civil offence<\/td><\/tr><tr><td>Economic phase<\/td><td>Closed economy<\/td><td>Liberalised economy<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Objectives of FEMA<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Facilitate external trade and payments<\/li>\n\n\n\n<li>Promote orderly development of forex market<\/li>\n\n\n\n<li>Regulate capital account transactions<\/li>\n\n\n\n<li>Maintain balance of payments stability<\/li>\n<\/ul>\n\n\n\n<p>Exam Tip: FEMA is management-oriented, not control-oriented.<\/p>\n\n\n\n<p>Also Check: <a href=\"https:\/\/www.oliveboard.in\/blog\/jaiib-ie-ifs-syllabus\/?ref=contac-nai-jaiib-forex\" target=\"_blank\" rel=\"noreferrer noopener\">JAIIB IE and IFS Syllabus<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_current_and_capital_account_transactions\"><\/span>What are current and capital account transactions?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Current account transactions relate to routine payments, while capital account transactions affect assets or liabilities between residents and non-residents.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Basis of Difference<\/strong><\/td><td><strong>Current Account Transactions<\/strong><\/td><td><strong>Capital Account Transactions<\/strong><\/td><\/tr><tr><td>Meaning<\/td><td>Transactions that do not alter assets or liabilities of residents outside India.<\/td><td>Transactions that alter assets or liabilities of residents outside India.<\/td><\/tr><tr><td>Nature<\/td><td>Revenue or routine transactions related to day-to-day international payments.<\/td><td>Transactions related to capital movement, investments, or borrowing\/lending across borders.<\/td><\/tr><tr><td>Impact on Balance of Payments<\/td><td>Recorded under the Current Account of Balance of Payments.<\/td><td>Recorded under the Capital Account of Balance of Payments.<\/td><\/tr><tr><td>Regulatory Approach under FEMA<\/td><td>Generally permitted freely, unless specifically restricted by RBI or Government.<\/td><td>Regulated and controlled by RBI; allowed only as per prescribed limits and conditions.<\/td><\/tr><tr><td>Objective<\/td><td>Facilitate trade, services, and routine payments.<\/td><td>Regulate capital flows and maintain financial stability.<\/td><\/tr><tr><td>Risk Level<\/td><td>Lower systemic risk.<\/td><td>Higher risk due to impact on capital flows and financial markets.<\/td><\/tr><tr><td>Examples<\/td><td>\u2022 Travel expenses abroad <br>\u2022 Education fees abroad <br>\u2022 Medical treatment abroad <br>\u2022 Interest payments <br>\u2022 Import\/export payments<\/td><td>\u2022 Foreign Direct Investment (FDI) <br>\u2022 Purchase of property abroad <br>\u2022 External Commercial Borrowings (ECB) <br>\u2022 Investment in foreign securities<\/td><\/tr><tr><td>Permission Status<\/td><td>Allowed unless prohibited.<\/td><td>Allowed only if specifically permitted.<\/td><\/tr><tr><td>Governing Law<\/td><td>Governed by FEMA provisions related to current account transactions.<\/td><td>Governed by FEMA provisions related to capital account transactions.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>Also Attempt<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Test Name<\/strong><\/td><td><strong>Link<\/strong><\/td><\/tr><tr><td>JAIIB IE and IFS Mock Test<\/td><td><a href=\"https:\/\/www.oliveboard.in\/jaiib-indian-economy-financial-system-mock-test\/?ref=contac\" target=\"_blank\" rel=\"noreferrer noopener\">Attempt Now<\/a><\/td><\/tr><tr><td>JAIIB PPB Mock Test<\/td><td><a href=\"https:\/\/www.oliveboard.in\/jaiib-principles-practices-of-banking-mock-test\/?ref=contac\" target=\"_blank\" rel=\"noreferrer noopener\">Attempt Now<\/a><\/td><\/tr><tr><td>JAIIB AFM Mock Test<\/td><td><a href=\"https:\/\/www.oliveboard.in\/jaiib-accounting-financial-management-mock-test\/?ref=contac\">Attempt Now<\/a><\/td><\/tr><tr><td>JAIIB RBWM Mock Test<\/td><td><a href=\"https:\/\/www.oliveboard.in\/jaiib-retail-banking-wealth-management-mock-test\/?ref=contac\">Attempt Now<\/a><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_inward_and_outward_remittances\"><\/span>What are inward and outward remittances?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Inward remittance refers to money received in India from abroad. Outward remittance refers to money sent from India to another country.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Basis of Comparison<\/strong><\/td><td><strong>Inward Remittances<\/strong><\/td><td><strong>Outward Remittances<\/strong><\/td><\/tr><tr><td>Meaning<\/td><td>Money received in India from abroad.<\/td><td>Money sent from India to another country.<\/td><\/tr><tr><td>Impact on Forex<\/td><td>Increases foreign exchange inflow into India.<\/td><td>Leads to foreign exchange outflow from India.<\/td><\/tr><tr><td>Direction of Flow<\/td><td>Foreign country \u2192 India<\/td><td>India \u2192 Foreign country<\/td><\/tr><tr><td>Common Sources \/ Purposes<\/td><td>\u2022 NRI family maintenance <br>\u2022 Salary earned abroad <br>\u2022 Export proceeds \u2022 Gifts from relatives \u2022 Foreign investments<\/td><td>\u2022 Education abroad \u2022 Medical treatment abroad \u2022 Travel expenses \u2022 Investment overseas \u2022 Gifts to relatives<\/td><\/tr><tr><td>Modes \/ Channels<\/td><td>\u2022 SWIFT transfer (bank-to-bank electronic transfer) <br>\u2022 Demand draft (foreign bank instrument) <br>\u2022 Online remittance through authorized dealers <br>\u2022 Foreign currency cheque deposited in Indian bank<\/td><td>\u2022 Remittance through Authorized Dealer banks <br>\u2022 Liberalised Remittance Scheme (LRS) route <br>\u2022 Wire transfers through banking channels<\/td><\/tr><tr><td>Regulatory Framework<\/td><td>Governed by FEMA and RBI guidelines for receipt of foreign exchange.<\/td><td>Governed by FEMA, RBI rules, and Liberalised Remittance Scheme (LRS).<\/td><\/tr><tr><td>Compliance Requirements for Banks<\/td><td>\u2022 KYC compliance <br>\u2022 Anti-Money Laundering (AML) norms <br>\u2022 FEMA compliance<\/td><td>\u2022 Verification of purpose <br>\u2022 LRS limit availability <br>\u2022 TCS applicability <br>\u2022 Proper documentation<\/td><\/tr><tr><td>Exam Relevance<\/td><td>Important for understanding export earnings and remittance inflows.<\/td><td>Important for LRS, capital account regulation, and forex outflow control.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Liberalised_Remittance_Scheme_LRS\"><\/span>What is the Liberalised Remittance Scheme (LRS)?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>LRS allows resident individuals to remit up to USD 250,000 per financial year for permitted current and capital account transactions.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Feature<\/strong><\/td><td><strong>Details<\/strong><\/td><\/tr><tr><td>Eligible<\/td><td>Resident individuals<\/td><\/tr><tr><td>Limit<\/td><td>USD 250,000 per FY<\/td><\/tr><tr><td>Covers<\/td><td>Travel, education, investment, gifts<\/td><\/tr><tr><td>Excludes<\/td><td>Lottery, margin trading, prohibited items<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-the-indo-nepal-remittance-scheme\"><span class=\"ez-toc-section\" id=\"What_is_the_Indo_Nepal_remittance_scheme\"><\/span>What is the Indo Nepal remittance scheme?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>This scheme facilitates small value remittances from India to Nepal.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>Feature<\/td><td>Details<\/td><\/tr><tr><td>Purpose<\/td><td>Send money to individuals in Nepal<\/td><\/tr><tr><td>Maximum limit<\/td><td>\u20b950,000 per transaction<\/td><\/tr><tr><td>Mode<\/td><td>Banking channel<\/td><\/tr><tr><td>Beneficiary<\/td><td>Individual only<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>Also Check:&nbsp;<a href=\"https:\/\/www.oliveboard.in\/jaiib-exam-date\/?ref-contac-nai-jaiib-tb\" target=\"_blank\" rel=\"noreferrer noopener\">JAIIB Complete 2026 Exam Schedule<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_forex_market\"><\/span>What is the forex market?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The forex market is the global marketplace where currencies are bought and sold. It is the largest and most liquid financial market in the world.<\/p>\n\n\n\n<p>Currencies are traded in pairs such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>USD\/INR<\/li>\n\n\n\n<li>EUR\/USD<\/li>\n\n\n\n<li>GBP\/JPY<\/li>\n<\/ul>\n\n\n\n<p>It operates 24 hours a day and is an Over-the-Counter (OTC) market.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_did_the_forex_market_evolve_in_India\"><\/span>How did the forex market evolve in India?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>India\u2019s forex market evolved gradually after economic reforms.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Period<\/strong><\/td><td><strong>Development<\/strong><\/td><\/tr><tr><td>Pre-1991<\/td><td>Strict control under FERA<\/td><\/tr><tr><td>Post-1991<\/td><td>Liberalisation begins<\/td><\/tr><tr><td>1999 onwards<\/td><td>FEMA introduced<\/td><\/tr><tr><td>Present<\/td><td>Managed floating exchange rate<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>India follows a managed float system, where market forces determine exchange rates but RBI intervenes when required.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.oliveboard.in\/jaiib\/?ref=contac-nai-jaiib-psa\" target=\"_blank\" rel=\"noreferrer noopener\">Explore JAIIB Online Courses<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_characteristics_of_the_forex_market\"><\/span>What are the characteristics of the forex market?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The forex market has distinct features that make it unique.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Characteristic<\/strong><\/td><td><strong>Explanation<\/strong><\/td><\/tr><tr><td>Decentralized<\/td><td>No central exchange<\/td><\/tr><tr><td>Highly liquid<\/td><td>Massive daily turnover<\/td><\/tr><tr><td>24-hour market<\/td><td>Operates across time zones<\/td><\/tr><tr><td>Two-way quotes<\/td><td>Bid and Ask prices<\/td><\/tr><tr><td>Influenced by macro factors<\/td><td>Inflation, interest rates, geopolitics<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_are_the_participants_in_the_forex_market\"><\/span>Who are the participants in the forex market?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Multiple entities participate in the forex market.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Participant<\/strong><\/td><td><strong>Role<\/strong><\/td><\/tr><tr><td>RBI<\/td><td>Regulator &amp; market stabilizer<\/td><\/tr><tr><td>Commercial banks<\/td><td>Major dealers<\/td><\/tr><tr><td>Corporates<\/td><td>Trade &amp; hedging<\/td><\/tr><tr><td>Forex brokers<\/td><td>Intermediaries<\/td><\/tr><tr><td>FIIs\/FPIs<\/td><td>Investment flows<\/td><\/tr><tr><td>Individuals<\/td><td>Travel &amp; remittance needs<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>Also Check:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Study Material<\/strong><\/td><td><strong>Study Material<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/www.oliveboard.in\/jaiib-ie-ifs-questions\/?ref=contac-reg-jaiib-sm\" target=\"_blank\" rel=\"noreferrer noopener\">JAIIB IE and IFS Important Questions PDF<\/a><\/td><td><a href=\"https:\/\/www.oliveboard.in\/jaiib-ppb-questions\/?ref=contac-nai-jaiib-sm\" target=\"_blank\" rel=\"noreferrer noopener\">JAIIB PPB Important Questions PDF<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/www.oliveboard.in\/jaiib-afm-questions\/?ref=contac-nai-jaiib-sm\" target=\"_blank\" rel=\"noreferrer noopener\">JAIIB AFM Important Questions PDF<\/a><\/td><td><a href=\"https:\/\/www.oliveboard.in\/jaiib-rbwm-questions\/?ref=contac-nai-jaiib-sm\" target=\"_blank\" rel=\"noreferrer noopener\">JAIIB RBWM Important Questions PDF<\/a><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_was_LIBOR_and_what_replaced_it\"><\/span>What was LIBOR and what replaced it?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>LIBOR was an international benchmark interest rate used for global lending. It was phased out due to manipulation concerns.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Currency<\/strong><\/td><td><strong>Replacement rate<\/strong><\/td><\/tr><tr><td>USD<\/td><td>SOFR<\/td><\/tr><tr><td>GBP<\/td><td>SONIA<\/td><\/tr><tr><td>EUR<\/td><td>\u20acSTR<\/td><\/tr><tr><td>JPY<\/td><td>TONA<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>These rates are transaction-based and more transparent.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.oliveboard.in\/jaiib-previous-year-papers\/?ref=contac-nai-tb\" target=\"_blank\" rel=\"noreferrer noopener\">Also Attempt JAIIB Previous Year Papers  Online<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_FEDAI_and_why_is_it_important\"><\/span>What is FEDAI and why is it important?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Foreign Exchange Dealers Association of India (FEDAI) is a self-regulatory body of banks dealing in foreign exchange in India.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Frame rules for forex dealings<\/li>\n\n\n\n<li>Standardize operational procedures<\/li>\n\n\n\n<li>Provide training<\/li>\n\n\n\n<li>Advise RBI<\/li>\n<\/ul>\n\n\n\n<p>Established in 1958, it plays a major role in maintaining discipline in forex dealings.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_US_dollar_index_USDX\"><\/span>What is the US dollar index (USDX)?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong>US Dollar Index (USDX)<\/strong> measures the strength of the US Dollar against a basket of major global currencies.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>Component<\/td><td>Details<\/td><\/tr><tr><td>Purpose of USDX<\/td><td>Measures the strength of the US Dollar against a basket of major global currencies.<\/td><\/tr><tr><td>Currencies in the Basket<\/td><td>\u2022 Euro (EUR) \u2022 Japanese Yen (JPY) \u2022 Pound Sterling (GBP) \u2022 Canadian Dollar (CAD) \u2022 Swedish Krona (SEK) \u2022 Swiss Franc (CHF)<\/td><\/tr><tr><td>Base Year<\/td><td>1973<\/td><\/tr><tr><td>Base Value<\/td><td>100<\/td><\/tr><tr><td>Interpretation \u2013 When USDX Rises<\/td><td>Indicates strengthening of the US Dollar against the basket currencies.<\/td><\/tr><tr><td>Interpretation \u2013 When USDX Falls<\/td><td>Indicates weakening of the US Dollar against the basket currencies.<\/td><\/tr><tr><td>Exam Relevance<\/td><td>Important for understanding global currency strength, capital flows, and impact on emerging markets like India.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>Also Check:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Study Plan<\/strong><\/td><td><strong>Study Plan<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/www.oliveboard.in\/blog\/how-to-prepare-for-jaiib-ie-and-ifs-exam\/?ref=contac-nai-jaiib\" target=\"_blank\" rel=\"noreferrer noopener\">JAIIB IE And IFS Study Plan<\/a><\/td><td><a href=\"https:\/\/www.oliveboard.in\/blog\/how-to-prepare-for-jaiib-ppb\/?ref=contss-jaiib\" target=\"_blank\" rel=\"noreferrer noopener\">JAIIB PPB Study Plan<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/www.oliveboard.in\/blog\/jaiib-afm-preparation\/?ref=contac-nai-jaiib\" target=\"_blank\" rel=\"noreferrer noopener\">JAIIB AFM Study Plan<\/a><\/td><td><a href=\"https:\/\/www.oliveboard.in\/blog\/jaiib-rbwm-strategy\/?ref=contac-nai-jaiib\" target=\"_blank\" rel=\"noreferrer noopener\">JAIIB RBWM Study Plan<\/a><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_ADR_and_GDR\"><\/span>What are ADR and GDR?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>ADR and GDR are instruments that allow companies to raise capital from foreign investors without directly listing shares abroad.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>American Depository Receipt (ADR)<\/strong> &#8211; An ADR is issued by a US bank representing shares of a foreign company and is traded on US stock exchanges.<\/li>\n\n\n\n<li><strong>Global Depository Receipt (GDR)<\/strong> &#8211; A GDR is similar to ADR but is traded in markets outside the USA, such as Europe.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Basis<\/strong><\/td><td><strong>ADR<\/strong><\/td><td><strong>GDR<\/strong><\/td><\/tr><tr><td>Market<\/td><td>USA<\/td><td>Europe\/Global<\/td><\/tr><tr><td>Currency<\/td><td>USD<\/td><td>Multiple currencies<\/td><\/tr><tr><td>Exchange<\/td><td>US exchanges<\/td><td>International exchanges<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-faqs\"><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1771310960306\"><strong class=\"schema-faq-question\">1. Which Act governs foreign exchange in India?<\/strong> <p class=\"schema-faq-answer\">Foreign exchange transactions in India are governed by the Foreign Exchange Management Act (FEMA), 1999.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1771310961606\"><strong class=\"schema-faq-question\">2. What is the main objective of FEMA?<\/strong> <p class=\"schema-faq-answer\">FEMA aims to facilitate external trade and promote orderly development of the forex market.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1771310962214\"><strong class=\"schema-faq-question\">3. What is the difference between current and capital account transactions?<\/strong> <p class=\"schema-faq-answer\">Current account transactions are routine payments, while capital account transactions alter assets or liabilities across borders.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1771310962886\"><strong class=\"schema-faq-question\">4. What are inward remittances?<\/strong> <p class=\"schema-faq-answer\">Inward remittances are funds received in India from abroad.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1771310963494\"><strong class=\"schema-faq-question\">5. What replaced LIBOR?<\/strong> <p class=\"schema-faq-answer\">LIBOR was replaced by Alternate Reference Rates such as SOFR, SONIA, and \u20acSTR.<\/p> <\/div> <\/div>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n<ul class=\"wp-block-latest-posts__list is-grid columns-3 wp-block-latest-posts\"><li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/www.oliveboard.in\/blog\/jaiib-exam-analysis-2026\/\">JAIIB Exam Analysis 2026, May Cycle, All Shifts Covered<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/www.oliveboard.in\/blog\/jaiib-ie-and-ifs-module-wise-study-guide\/\">JAIIB IE &amp; IFS Module-Wise Mind Maps, Download Free PDF<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/www.oliveboard.in\/blog\/jaiib-free-quizzes\/\">Attempt JAIIB Free Practice Quizzes &amp; Download Paper-wise PDFs<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/www.oliveboard.in\/blog\/indian-financial-system-handwritten-notes\/\">Indian Financial System Handwritten Notes, Download PDF<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/www.oliveboard.in\/blog\/jaiib-2026-expected-questions\/\">JAIIB 2026 Questions from Repetitive Topics, Download Free PDF<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/www.oliveboard.in\/blog\/ppb-previous-year-question-paper-pdf\/\">Attempt JAIIB PPB Previous Year Practice Quiz, Download PDF<\/a><\/li>\n<\/ul>","protected":false},"excerpt":{"rendered":"<p>Foreign Exchange and the Forex Market form the backbone of international trade, cross-border investments, and global financial stability. For JAIIB<\/p>\n","protected":false},"author":50,"featured_media":237607,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,10353],"tags":[],"class_list":["post-97187","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles","category-jaiib","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-50"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.6 (Yoast SEO v26.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Foreign Exchange, Forex Market, Important for JAIIB IE &amp; IFS 2026<\/title>\n<meta name=\"description\" content=\"Learn about foreign exchange arithmetic and its significance in global financial stability and cross-border investments.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Foreign Exchange, Forex Market, Important for JAIIB IE &amp; IFS 2026\" \/>\n<meta property=\"og:description\" content=\"Foreign Exchange and the Forex Market form the backbone of international trade, cross-border investments, and global financial stability. For JAIIB IE and\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/\" \/>\n<meta property=\"og:site_name\" content=\"Oliveboard\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Oliveboard\" \/>\n<meta property=\"article:published_time\" content=\"2026-03-03T16:11:12+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-03-03T16:11:15+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.oliveboard.in\/blog\/wp-content\/uploads\/2022\/06\/JAIIB-7-1.webp\" \/>\n\t<meta property=\"og:image:width\" content=\"730\" \/>\n\t<meta property=\"og:image:height\" content=\"480\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/webp\" \/>\n<meta name=\"author\" content=\"Saloni Singhal\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@Oliveboard\" \/>\n<meta name=\"twitter:site\" content=\"@Oliveboard\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Saloni Singhal\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"NewsArticle\",\"@id\":\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.oliveboard.in\/blog\/foreign-exchange-arithmetic\/\"},\"author\":{\"name\":\"Saloni Singhal\",\"@id\":\"https:\/\/www.oliveboard.in\/blog\/#\/schema\/person\/6aedd7baaab0f33dc2f40834a257f88c\"},\"headline\":\"Foreign Exchange, Forex Market, Important for JAIIB IE &amp; 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